A leading fiscal watchdog is proposing a new cap on Social Security payouts, arguing that the change could help shore up the program’s long-term finances as it edges closer to insolvency.
The Committee for a Responsible Federal Budget outlined a plan on Tuesday to limit annual Social Security benefits to $100,000 for couples retiring at a normal age. The policy proposal has been dubbed the “Six Figure Limit.”
The proposal comes as Social Security’s trust fund is projected to reach insolvency in seven years. Without congressional action, the program would only be able to pay a portion of scheduled benefits, triggering cuts for millions of retirees who have paid into the program.
The group argues that capping benefits for the highest earners would bring the United States in line with most other developed nations. According to their analysis, retirement benefits for other countries usually cap between $30,000 and $40,000, the study found.
By contrast, the U.S. spends more than 5% of GDP on Social Security payouts — significantly more than countries such as Canada, which spends about half that share, and Sweden, which spends under 1%.
The think tank estimates that the cap would save $100 billion over the next decade and close one-fifth of Social Security’s 75-year funding gap.
Still, the proposal raises questions about possible unintended consequences. Analysts acknowledged that capping benefits could create disincentives for high earners, who might scale back work if additional income no longer translates into higher future benefits.
At the same time, the group argues the policy could have broader economic benefits that offset negative work incentives.
By reducing long-term deficits, they argue, the proposal could lower public debt levels by an estimated 2%-10% of GDP over 30 years and 30%-70% over 75 years, easing pressure on interest rates and boosting investment across the economy.
The plan is one of several competing ideas emerging in Washington as lawmakers also search for ways to stabilize Social Security.
Earlier this week, Sens. Bill Cassidy (R-LA) and Tim Kaine (D-VA) floated a separate proposal that would inject roughly $1.5 trillion into the system through stock market investments. Under their plan, Social Security would borrow funds over the next 75 years to maintain full benefits, with the expectation that investment returns would repay the debt.
The approach has drawn skepticism from budget experts, including the Committee for a Responsible Federal Budget.
“The proposal is likely to worsen the overall fiscal situation and introduce significant risks to the budget, the Social Security program, the economy, and public policy,” the group said.
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Experts at the Committee for a Responsible Federal Budget point to international models as a possible road map — including systems that guarantee a base level of income for all seniors while scaling back benefits for wealthier retirees.
“The larger goal,” the group wrote, “should be to follow the example of other countries that have successfully reformed their public pension programs. … The ultimate provider of retirement security is hard work and private investment, not Uncle Sam.”
